Cablegate: Turkey's $3.3 Billion Debt Service On Feb. 5;

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS ANKARA 000822

SIPDIS

SENSITIVE

STATE FOR E, EB/IFD/OMA AND EUR/SE
TREASURY FOR OASIA - MILLS AND LEICHTER
STATE PASS USTR - NOVELLI AND BIRDSEY

E.O. 12958: N/A
TAGS: ECON EFIN PREL TU
SUBJECT: TURKEY'S $3.3 BILLION DEBT SERVICE ON FEB. 5;
TREASURY'S REVISED INTEREST RATE PROJECTIONS FOR 2003

REF: ANKARA 752

Sensitive but unclassified. Not for internet distribution.

1. (U) Turkish Treasury released its February Domestic Debt
Service schedule on January 31, showing a monthly total of TL
6.8 quadrillion ($4.1 billion), of which TL 5.6 quadrillion
is to be paid on February 5. Given the ten-day holiday in the
middle of the month, during which another TL 0.8 quadrillion
is due, the entire borrowing burden for the month falls in
the first week.

2. (SBU) Treasury's goal is to raise at least TL 4.5
quadrillion (about $2.8 billion) in T-bill auctions on
February 4, according to Deputy DG Volkan Taskin. He told
us this is the minimum amount needed. Other sources that
will be tapped to meet February debt service include:

-- External borrowing of $350 million announced on January 31
(a re-opening of the 2008 maturity dollar bond launched
November 7).
-- Treasury's cash account, currently at TL 5.2 quadrillion
(though much of this is needed to pay GOT salaries and make
external debt service payments in February).

3. (SBU) Volkan also provided Treasury's latest projections
for 2003 domestic borrowing, after the January 28 Higher
Planning Council decisions on 2003 budget aggregates
(reftel).

-- Average nominal interest rate on fixed rate lira
T-bills: 43 percent.
-- Market roll-over rate: 93 percent;
total roll-over rate: 87 percent.
-- Average maturity of new fixed rate T-bills: 8 months.
-- Assumptions: $4.5 billion in Eurobonds; $1.7 billion in
IMF disbursements. U.S. bilateral aid not assumed.

4. (SBU) Taskin said Treasury has told the GOT that to get
the 43 percent average interest rate over 2003 will require
full implementation of the IMF program, and good timing on
the Iraq crisis. Treasury expects interest rates to decline
after the Iraq crisis, but to stay at current levels or even
higher until then. To get the sharp declines needed after
Iraq, the GOT needs to have its economic reform policies in
order, per Taskin.

5. (SBU) Comment: One potential problem for the February 4
t-bill auctions will be the February 3 release of January
inflation data - some market analysts are predicting CPI to
come in very high, in the 3-4 percent range.
PEARSON

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